Netflix Culture: Freedom & Responsibility

126
Netflix Culture: Freedom & Responsibility 1

description

Netflix Culture: Freedom & Responsibility . We Seek Excellence. Our culture focuses on helping us achieve excellence. Seven Aspects of our Culture. Values are what we Value High Performance Freedom & Responsibility Context, not Control Highly Aligned, Loosely Coupled Pay Top of Market - PowerPoint PPT Presentation

Transcript of Netflix Culture: Freedom & Responsibility

Page 1: Netflix Culture: Freedom & Responsibility

Netflix Culture:Freedom & Responsibility

1

Page 2: Netflix Culture: Freedom & Responsibility

We Seek Excellence

Our culture focuses on helping us achieve excellence

2

Page 3: Netflix Culture: Freedom & Responsibility

Seven Aspects of our Culture

• Values are what we Value• High Performance • Freedom & Responsibility• Context, not Control• Highly Aligned, Loosely Coupled• Pay Top of Market• Promotions & Development

3

Page 4: Netflix Culture: Freedom & Responsibility

Many companies have nice sounding value statements displayed in the lobby, such as:

4

IntegrityCommunication

RespectExcellence

Page 5: Netflix Culture: Freedom & Responsibility

Enron, whose leaders went to jail, and which went bankrupt from fraud,

had these values displayed in their lobby:

IntegrityCommunication

RespectExcellence

5(These values were not, however, what was really valued at Enron)

Page 6: Netflix Culture: Freedom & Responsibility

The actual company values, as opposed to the

nice-sounding values, are shown by who gets

rewarded, promoted, or let go

6

Page 7: Netflix Culture: Freedom & Responsibility

Actual company values are thebehaviors and skills

that are valued in fellow employees

7

Page 8: Netflix Culture: Freedom & Responsibility

At Netflix, we particularly value the following nine behaviors and skills

in our colleagues…

…meaning we hire and promote people who demonstrate these nine

8

Page 9: Netflix Culture: Freedom & Responsibility

You make wise decisions (people, technical, business, and creative) despite ambiguity

You identify root causes, and get beyond treating symptoms

You think strategically, and can articulate what you are, and are not, trying to do

You smartly separate what must be done well now, and what can be improved later

9

Judgment

Page 10: Netflix Culture: Freedom & Responsibility

10

Communication

You listen well, instead of reacting fast, so you can better understand

You are concise and articulate in speech and writing

You treat people with respect independent of their status or disagreement with you

You maintain calm poise in stressful situations

Page 11: Netflix Culture: Freedom & Responsibility

11

Impact

You accomplish amazing amounts of important work

You demonstrate consistently strong performance so colleagues can rely upon you

You focus on great results rather than on process

You exhibit bias-to-action, and avoid analysis-paralysis

Page 12: Netflix Culture: Freedom & Responsibility

12

Curiosity

You learn rapidly and eagerly

You seek to understand our strategy, market, customers, and suppliers

You are broadly knowledgeable about business, technology and entertainment

You contribute effectively outside of your specialty

Page 13: Netflix Culture: Freedom & Responsibility

13

Innovation

You re-conceptualize issues to discover practical solutions to hard problems

You challenge prevailing assumptions when warranted, and suggest better approaches

You create new ideas that prove useful

You keep us nimble by minimizing complexity and finding time to simplify

Page 14: Netflix Culture: Freedom & Responsibility

14

Courage

You say what you think even if it is controversial

You make tough decisions without agonizing

You take smart risks

You question actions inconsistent with our values

Page 15: Netflix Culture: Freedom & Responsibility

15

Passion

You inspire others with your thirst for excellence

You care intensely about Netflix‘s success

You celebrate wins

You are tenacious

Page 16: Netflix Culture: Freedom & Responsibility

16

Honesty

You are known for candor and directness

You are non-political when you disagree with others

You only say things about fellow employees you will say to their face

You are quick to admit mistakes

Page 17: Netflix Culture: Freedom & Responsibility

17

Selflessness

You seek what is best for Netflix, rather than best for yourself or your group

You are ego-less when searching for the best ideas

You make time to help colleagues

You share information openly and proactively

Page 18: Netflix Culture: Freedom & Responsibility

Seven Aspects of our Culture

• Values are what we Value• High Performance • Freedom & Responsibility• Context, not Control• Highly Aligned, Loosely Coupled• Pay Top of Market• Promotions & Development

18

Page 19: Netflix Culture: Freedom & Responsibility

Imagine if every person at Netflix is someone you

respect and learn from…

19

Page 20: Netflix Culture: Freedom & Responsibility

Great Workplace is Stunning Colleagues

Great workplace is not espresso, lush benefits, sushi lunches, grand parties, or nice offices

We do some of these things, but only if they are efficient at

attracting and retaining stunning colleagues

20

Page 21: Netflix Culture: Freedom & Responsibility

Like every company, we try to hire well

21

Page 22: Netflix Culture: Freedom & Responsibility

Unlike many companies, we practice:

adequate performance gets a generous severance package

22

Page 23: Netflix Culture: Freedom & Responsibility

We’re a team, not a family

We’re like a pro sports team, not a kid’s recreational team

Netflix leadershire, develop and cut smartly,

so we have stars in every position

23

Page 24: Netflix Culture: Freedom & Responsibility

The Keeper Test Managers Use:Which of my people,

if they told me they were leaving,for a similar job at a peer company, would I fight hard to keep at Netflix?

24

Page 25: Netflix Culture: Freedom & Responsibility

The Keeper Test Managers Use:Which of my people,

if they told me they were leaving,for a similar job at a peer company, would I fight hard to keep at Netflix?

25

The other people should get a generous severance now, so we can open a slot to try to find a star for that role

Page 26: Netflix Culture: Freedom & Responsibility

Honesty Always

As a leader, no one in your group should be materially surprised of

your views

26

Page 27: Netflix Culture: Freedom & Responsibility

Honesty Always

Candor is not just a leader’s responsibility, and you should periodically ask your

manager: “If I told you I were leaving, how hard would you work to change my mind?”

27

Page 28: Netflix Culture: Freedom & Responsibility

All of Us are Responsible for Ensuring We Live our Values

“You question actions inconsistent with our values” is part of the Courage value

Akin to the honor code pledge: “I will not lie, nor cheat, nor steal,

nor tolerate those who do”

28

Page 29: Netflix Culture: Freedom & Responsibility

Pro Sports Team Metaphor is Good, but Imperfect

Athletic teams have a fixed number of positions, so team members are always

competing with each other for one of the precious slots

29

Page 30: Netflix Culture: Freedom & Responsibility

Corporate Team

The more talent we have, the more we can accomplish,

so our people assist each other all the time

Internal “cutthroat” or “sink or swim” behavior is rare and not tolerated

30

Page 31: Netflix Culture: Freedom & Responsibility

We Help Each Other To Be Great

31

Page 32: Netflix Culture: Freedom & Responsibility

Isn’t Loyalty Good? What about Hard Workers?What about Brilliant Jerks?

32

Page 33: Netflix Culture: Freedom & Responsibility

Loyalty is Good

• Loyalty is good as a stabilizer• People who have been stars for us, and hit a bad

patch, get a near term pass because we think they are likely to become stars for us again

• We want the same: if Netflix hits a temporary bad patch, we want people to stick with us

• But unlimited loyalty to a shrinking firm, or to an ineffective employee, is not what we are about

33

Page 34: Netflix Culture: Freedom & Responsibility

Hard Work – Not Relevant

• We don’t measure people by how many hours they work or how much they are in the office

• We do care about accomplishing great work• Sustained B-level performance, despite “A for

effort”, generates a generous severance package, with respect

• Sustained A-level performance, despite minimal effort, is rewarded with more responsibility and great pay

34

Page 35: Netflix Culture: Freedom & Responsibility

Brilliant Jerks

• Some companies tolerate them• For us, cost to effective teamwork is too high• Diverse styles are fine – as long as person

embodies the 9 values

35

Page 36: Netflix Culture: Freedom & Responsibility

Why are we so insistent on high performance?In procedural work, the best are 2x

better than the average.In creative/inventive work, the best are 10x

better than the average, so huge premium on creating effective teams of the best

36

Page 37: Netflix Culture: Freedom & Responsibility

Why are we so insistent on high performance?

Great Workplace is Stunning Colleagues

37

Page 38: Netflix Culture: Freedom & Responsibility

Our High Performance Culture Not Right for Everyone

• Many people love our culture, and stay a long time– They thrive on excellence and candor and change– They would be disappointed if given a severance package, but

lots of mutual warmth and respect• Some people, however, value job security and stability

over performance, and don’t like our culture– They feel fearful at Netflix– They are sometimes bitter if let go, and feel that we are political

place to work• We’re getting better at attracting only the former, and

helping the latter realize we are not right for them

38

Page 39: Netflix Culture: Freedom & Responsibility

Seven Aspects of our Culture

• Values are what we Value• High Performance • Freedom & Responsibility• Context, not Control• Highly Aligned, Loosely Coupled• Pay Top of Market• Promotions & Development

39

Page 40: Netflix Culture: Freedom & Responsibility

The Rare Responsible Person

• Self motivating• Self aware• Self disciplined• Self improving• Acts like a leader• Doesn’t wait to be told what to do• Picks up the trash lying on the floor

40

Page 41: Netflix Culture: Freedom & Responsibility

Responsible People Thrive on Freedom,

and are Worthy of Freedom

41

Page 42: Netflix Culture: Freedom & Responsibility

Our model is to increase employee freedom as we grow,

rather than limit it, to continue to attract and nourish innovative people,

so we have better chance of sustained success

42

Page 43: Netflix Culture: Freedom & Responsibility

Most Companies Curtail Freedom as they get Bigger

Bigger

Employee Freedom

43

Page 44: Netflix Culture: Freedom & Responsibility

Why Do Most Companies Curtail Freedom

and Become Bureaucratic as they Grow?

44

Page 45: Netflix Culture: Freedom & Responsibility

Desire for Bigger Positive Impact Creates Growth

Growth

45

Page 46: Netflix Culture: Freedom & Responsibility

Growth Increases Complexity

Complexity

46

Page 47: Netflix Culture: Freedom & Responsibility

Growth Also Often Shrinks Talent Density

% High Performance Employees

Complexity

47

Page 48: Netflix Culture: Freedom & Responsibility

Chaos Emerges

% High Performance Employees

Chaos and errors spike here – businesshas become too complex to runinformally with this talent level Complexity

48

Page 49: Netflix Culture: Freedom & Responsibility

Process Emerges to Stop the Chaos

ProceduresNo one loves process, butfeels good compared to thepain of chaos

“Time to grow up” becomesthe professional management’smantra

49

Page 50: Netflix Culture: Freedom & Responsibility

Process-focus Drives More Talent Out

% High Performance Employees

50

Page 51: Netflix Culture: Freedom & Responsibility

Process Brings Seductively Strong Near-Term Outcome

• A highly-successful process-driven company– With leading share in its market– Minimal thinking required– Few mistakes made – very efficient– Few curious innovator-mavericks remain– Very optimized processes for its existing market– Efficiency has trumped flexibility

51

Page 52: Netflix Culture: Freedom & Responsibility

Then the Market Shifts…

• Market shifts due to new technology or competitors or business models

• Company is unable to adapt quickly – because the employees are extremely good at

following the existing processes, and process adherence is the value system

• Company generally grinds painfully into irrelevance

52

Page 53: Netflix Culture: Freedom & Responsibility

Seems Like Three Bad Options

1. Stay creative by staying small, but therefore have less impact

2. Avoid rules as you grow, and suffer chaos3. Use process as you grow to drive efficient

execution of current model, but cripple creativity, flexibility, and ability to thrive when your market eventually changes

53

Page 54: Netflix Culture: Freedom & Responsibility

A Fourth Option

• Avoid Chaos as you grow with Ever More High Performance People – not with Rules– Then you can continue to mostly run informally

with self-discipline, and avoid chaos– The run informally part is what enables and

attracts creativity

54

Page 55: Netflix Culture: Freedom & Responsibility

The Key: Increase Talent Density faster than Complexity Grows

% High Performance Employees

Business Complexity

55

Page 56: Netflix Culture: Freedom & Responsibility

Increase Talent Density

• Top of market compensation• Attract high-value people through

freedom to make big impact• Be demanding about high

performance culture

% High Performance Employees

56

Page 57: Netflix Culture: Freedom & Responsibility

Minimize Complexity Growth

Business Complexity

• Few big products vs many small ones• Eliminate distracting complexity (barnacles)• Be wary of efficiency optimizations that

increase complexity and rigidity

57

Note: sometimes long-term simplicity is achieved only through bursts of complexity to rework current systems

Page 58: Netflix Culture: Freedom & Responsibility

With the Right People,

Instead of a Culture of Process Adherence,

We have a Culture of Creativity and Self-Discipline,Freedom and Responsibility

58

Page 59: Netflix Culture: Freedom & Responsibility

Is Freedom Absolute?

Are all rules & processes bad?

59

Page 60: Netflix Culture: Freedom & Responsibility

Freedom is not absolute

Like “free speech” there are some

limited exceptions to “freedom at work”

60

Page 61: Netflix Culture: Freedom & Responsibility

Two Types of Necessary Rules

1. Prevent irrevocable disaster– Financials produced are wrong– Hackers steal our customers’ credit card info

2. Moral, ethical, legal issues– Dishonesty, harassment are intolerable

61

Page 62: Netflix Culture: Freedom & Responsibility

Mostly, though, Rapid Recovery is the Right Model

• Just fix problems quickly– High performers make very few errors

• We’re in a creative-inventive market, not a safety-critical market like medicine or nuclear power

• You may have heard preventing error is cheaper than fixing it– Yes, in manufacturing or medicine, but…– Not so in creative environments

62

Page 63: Netflix Culture: Freedom & Responsibility

“Good” versus “Bad” Process• “Good” process helps talented people get more done

– Letting others know when you are updating code– Spend within budget each quarter so don’t have to coordinate

every spending decision across departments– Regularly scheduled strategy and context meetings

• “Bad” process tries to prevent recoverable mistakes– Get pre-approvals for $5k spending– 3 people to sign off on banner ad creative– Permission needed to hang a poster on a wall– Multi-level approval process for projects– Get 10 people to interview each candidate

63

Page 64: Netflix Culture: Freedom & Responsibility

Rule Creep

• “Bad” processes tend to creep in– Preventing errors just sounds so good

• We try to get rid of rules when we can, to reinforce the point

64

Page 65: Netflix Culture: Freedom & Responsibility

Example: Netflix Vacation Policy and Tracking

Until 2004 we had the standard model of N days per year

65

Page 66: Netflix Culture: Freedom & Responsibility

Meanwhile…

We’re all working online some nights and weekends, responding to emails at odd

hours, spending some afternoons on personal time, and taking good vacations

66

Page 67: Netflix Culture: Freedom & Responsibility

An employee pointed out…

We don’t track hours worked per day or per week, so why are we tracking

days of vacation per year?

67

Page 68: Netflix Culture: Freedom & Responsibility

We realized…

We should focus on what people get done, not on how many days worked

Just as we don’t have an 9am-5pm workday policy, we don’t need a vacation policy

68

Page 69: Netflix Culture: Freedom & Responsibility

Netflix Vacation Policy and Tracking

“there is no policy or tracking”

69

Page 70: Netflix Culture: Freedom & Responsibility

Netflix Vacation Policy and Tracking

“there is no policy or tracking”

There is also no clothing policy at Netflix, but no one comes to work naked

Lesson: you don’t need policies for everything

70

Page 71: Netflix Culture: Freedom & Responsibility

No Vacation Policy Doesn’t Mean

No VacationNetflix leaders set good examples by

taking big vacations – and coming back inspired to find big ideas

71

Page 72: Netflix Culture: Freedom & Responsibility

Another Example of Freedom and Responsibility…

72

Page 73: Netflix Culture: Freedom & Responsibility

Most companies have complex policies around what you can expense, how you travel, what gifts you can accept, etc.

Plus they have whole departments to verify compliance with these policies

73

Page 74: Netflix Culture: Freedom & Responsibility

Netflix Policies for Expensing, Entertainment,

Gifts & Travel:

“Act in Netflix’s Best Interest”

(5 words long)

74

Page 75: Netflix Culture: Freedom & Responsibility

“Act in Netflix’s Best Interest” Generally Means…

1. Expense only what you would otherwise not spend, and is worthwhile for work

2. Travel as you would if it were your own money3. Disclose non-trivial vendor gifts4. Take from Netflix only when it is inefficient to not

take, and inconsequential– “taking” means, for example, printing personal

documents at work or making personal calls on work phone: inconsequential and inefficient to avoid

75

Page 76: Netflix Culture: Freedom & Responsibility

Freedom and Responsibility

• Many people say one can’t do it at scale• But since going public in 2002, which is

traditionally the end of freedom, we’ve substantially increased talent density and employee freedom

76

Page 77: Netflix Culture: Freedom & Responsibility

Summary of Freedom & Responsibility:

As We Grow, Minimize Rules

Inhibit Chaos with Ever More High Performance People

Flexibility is More Important than Efficiency in the Long Term

77

Page 78: Netflix Culture: Freedom & Responsibility

Seven Aspects of our Culture

• Values are what we Value• High Performance • Freedom & Responsibility• Context, not Control• Highly Aligned, Loosely Coupled• Pay Top of Market• Promotions & Development

78

Page 79: Netflix Culture: Freedom & Responsibility

If you want to build a ship, don't drum up the people to gather wood, divide the

work, and give orders. Instead, teach them to yearn for the vast and endless sea.

-Antoine De Saint-Exupery, Author of The Little Prince

79

Page 80: Netflix Culture: Freedom & Responsibility

The best managers figure out how to get great outcomes by setting the appropriate context, rather than by trying to control their people

80

Page 81: Netflix Culture: Freedom & Responsibility

Context, not Control

Context (embrace)• Strategy• Metrics• Assumptions• Objectives• Clearly-defined roles • Knowledge of the stakes• Transparency around

decision-making

Control (avoid)• Top-down decision-making• Management approval• Committees• Planning and process valued

more than results

Provide the insight and understanding to enable sound decisions

81

Page 82: Netflix Culture: Freedom & Responsibility

Good Context

• Link to company/functional goals• Relative priority (how important/how time sensitive)

– Critical (needs to happen now), or…– Nice to have (when you can get to it)

• Level of precision & refinement– No errors (credit cards handling, etc…), or…– Pretty good / can correct errors (website), or…– Rough (experimental)

• Key stakeholders• Key metrics / definition of success

82

Page 83: Netflix Culture: Freedom & Responsibility

Managers: When one of your talented peopledoes something dumb,

don’t blame them

Instead, ask yourself what context

you failed to set

83

Page 84: Netflix Culture: Freedom & Responsibility

Managers: When you are tempted to “control” your people, ask yourself what context you could

set instead

Are you articulate and inspiring enough about goals and strategies?

84

Page 85: Netflix Culture: Freedom & Responsibility

Why Managing Through Context?

High performance people will do better work if they understand the

context

85

Page 86: Netflix Culture: Freedom & Responsibility

Investing in Context

This is why we do new employee college, frequent department meetings, and why we are so open internally about strategies and

results

86

Page 87: Netflix Culture: Freedom & Responsibility

Exceptions to “Context, not Control”

• Control can be important in emergency – No time to take long-term capacity-building view

• Control can be important when someone is still learning their area– Takes time to pick up the necessary context

• Control can be important when you have the wrong person in a role– Temporarily, no doubt

87

Page 88: Netflix Culture: Freedom & Responsibility

Seven Aspects of our Culture

• Values are what we Value• High Performance • Freedom & Responsibility• Context, not Control• Highly Aligned, Loosely Coupled• Pay Top of Market• Promotions & Development

88

Page 89: Netflix Culture: Freedom & Responsibility

Three Models of Corporate Teamwork

1. Tightly Coupled Monolith2. Independent Silos3. Highly Aligned, Loosely Coupled

89

Page 90: Netflix Culture: Freedom & Responsibility

Tightly Coupled Monolith

• Senior management reviews nearly all tactics– e.g., CEO reviews all job offers or advertising

• Lots of x-departmental buy-in meetings• Keeping other internal groups happy has equal

precedence with pleasing customers• Mavericks get exhausted trying to innovate• Highly coordinated through centralization, but

very slow, and slowness increases with size

90

Page 91: Netflix Culture: Freedom & Responsibility

Independent Silos

• Each group executes on their objectives with little coordination– Everyone does their own thing

• Work that requires coordination suffers• Alienation and suspicion between

departments• Only works well when areas are independent– e.g., aircraft engines and blenders for GE

91

Page 92: Netflix Culture: Freedom & Responsibility

#3 is the Netflix Choice

1. Tightly Coupled Monolith2. Independent Silos3. Highly Aligned, Loosely Coupled

92

Page 93: Netflix Culture: Freedom & Responsibility

Highly Aligned, Loosely Coupled• Highly Aligned

– Strategy and goals are clear, specific, broadly understood– Team interactions focused on strategy and goals, rather than tactics– Requires large investment in management time to be transparent and

articulate and perceptive• Loosely Coupled

– Minimal cross-functional meetings except to get aligned on goals and strategy

– Trust between groups on tactics without previewing/approving each one – so groups can move fast

– Leaders reaching out proactively for ad-hoc coordination and perspective as appropriate

– Occasional post-mortems on tactics necessary to increase alignment

93

Page 94: Netflix Culture: Freedom & Responsibility

Highly Aligned, Loosely Coupled teamwork effectiveness depends on

high performance people and good context

Goal is to be Big and Fast and Flexible

94

Page 95: Netflix Culture: Freedom & Responsibility

Seven Aspects of our Culture

• Values are what we Value• High Performance • Freedom & Responsibility• Context, not Control• Highly Aligned, Loosely Coupled• Pay Top of Market• Promotions & Development

95

Page 96: Netflix Culture: Freedom & Responsibility

Pay Top of Market is Core to

High Performance Culture

One outstanding employee gets more done and costs less than two adequate employees

We endeavor to have only outstanding employees

96

Page 97: Netflix Culture: Freedom & Responsibility

Three Tests for Top of Market for a Person

1. What could person get elsewhere?2. What would we pay for replacement?3. What would we pay to keep that person?– If they had a bigger offer elsewhere

97Confidential

Page 98: Netflix Culture: Freedom & Responsibility

Takes Great Judgment

• Goal is to keep each employee at top of market for that person – Pay them more than anyone else likely would– Pay them as much as a replacement would cost– Pay them as much as we would pay to keep them

if they had higher offer from elsewhere

98

Page 99: Netflix Culture: Freedom & Responsibility

Titles Not Very Helpful

• Lots of people have the title “Major League Pitcher” but they are not all equally effective

• Similarly, all people with the title “Senior Marketing Manager” or “Director of Engineering” are not equally effective

• So the art of compensation is answering the Three Tests for each employee

99

Page 100: Netflix Culture: Freedom & Responsibility

Annual Comp Review

• At many firms, when employees are hired, market compensation applies• But at comp review time, it no longer applies!

• At Netflix, market comp always applies:– Essentially, top of market comp is re-established

each year for high performing employees– At annual comp review, manager has to answer

the Three Tests for the personal market for each of their employees

100Confidential

Page 101: Netflix Culture: Freedom & Responsibility

No Fixed Budgets

• There are no centrally administered “raise pools” each year

• Instead, each manager aligns their people to top of market each year – the market will be different in different areas

101

Page 102: Netflix Culture: Freedom & Responsibility

Compensation Over Time

• Some people will move up in comp very quickly because their value in the marketplace is moving up quickly, driven by increasing skills and/or great demand for their area

• Some people will stay flat because their value in the marketplace has done that– Depends in part on inflation and economy– Always top of market, though, for that person

102

Page 103: Netflix Culture: Freedom & Responsibility

Compensation Not Dependent on Netflix Success

• Whether Netflix is prospering or floundering, we pay at the top of the market– i.e., sports teams with losing records still pay

talent the market rate• Employees can choose how much they want

to link their economic destiny to Netflix by deciding how many Netflix stock options they want to hold

103

Page 104: Netflix Culture: Freedom & Responsibility

Bad Comp Practices

• Manager sets pay at Nth percentile of title-linked compensation data– The “Major League Pitcher” problem

• Manager cares about internal parity instead of external market value– Fairness in comp is being true to the market

• Manager gives everyone a 4% raise– Very unlikely to reflect the market

104

Page 105: Netflix Culture: Freedom & Responsibility

When Top of Market Comp Done Right...

• We will rarely counter with higher comp when someone is voluntarily leaving because we have already moved comp to our max for that person

• Employees will feel they are getting paid well relative to their other options in the market

105

Page 106: Netflix Culture: Freedom & Responsibility

Versus Traditional Model

• Traditional model is good prior year earns a raise, independent of market– Problem is employees can get materially under- or

over-paid relative to the market, over time– When materially under-paid, employees switch firms

to take advantage of market-based pay on hiring– When materially over-paid, employees are trapped

in current firm• Consistent market-based pay is better model

106

Page 107: Netflix Culture: Freedom & Responsibility

Employee Success

• It’s pretty ingrained in our society that the size of one’s raise is the indicator of how well one did the prior year– but for us the other factor is the outside market

• Employee success is still a big factor in comp because it influences market value– In particular, how much we would pay to keep the

person

107

Page 108: Netflix Culture: Freedom & Responsibility

Good For Each Employee to Understand Their Market Value

• It’s a healthy idea, not a traitorous one, to understand what other firms would pay you, by interviewing and talking to peers at other companies– Talk with your manager about what you find in

terms of comp– Stay mindful of company confidential information

108

Page 109: Netflix Culture: Freedom & Responsibility

Efficiency

• Big salary is the most efficient form of comp – Most motivating for any given expense level– No bonuses, no free stock options, no philanthropic match– Instead, put all that expense into big salaries, and give

people freedom to spend their salaries as they think best• Health benefits: employees get $10k per year

– If they choose Netflix plans that are less than $10k, they keep the difference

– If they don’t need benefits from us, they keep all $10k– CEO or receptionist: everyone gets $10k for benefits

109

Page 110: Netflix Culture: Freedom & Responsibility

Optional Options

• Employees get top of market salary, and then can request to trade salary for stock options

• Some people take all cash, some people request half their comp in options– Both are OK

• This is consistent with freedom and responsibility, and lets employees decide how much risk/reward is comfortable for them

110

Page 111: Netflix Culture: Freedom & Responsibility

Details on Stock Options

• The options are fully vested and are 10-years-to-exercise options, independent of how long one stays at Netflix

• These fully vested options are granted monthly at the then current stock price, so employees get price averaging on their exercise price

• These options cost employees less than half of what such options would cost in the open market, and are from pre-tax salary, so are a great deal

• Employees can change their option request annually• Options become valuable only if Netflix stock climbs

111

Page 112: Netflix Culture: Freedom & Responsibility

No Vesting or Deferred Comp

• We don’t want managers to “own” their people with vesting – all comp is fully vested

• We want managers to be responsible for creating a great place to work, and paying at the top of market

• Employees are free to leave us anytime, without penalty, but nearly everyone stays

• Employees stay because they are passionate about their work, and well paid, not because of a deferred compensation system

112

Page 113: Netflix Culture: Freedom & Responsibility

No Ranking Against Other Employees

• We avoid “top 30%” and “bottom 10%” rankings amongst employees

• We don’t want employees to feel competitive with each other

• We want all of our employees to be “top 10%” relative to the pool of global candidates

• We want employees to help each other, and they do

113

Page 114: Netflix Culture: Freedom & Responsibility

Seven Aspects of our Culture

• High Performance • Values are what we Value• Freedom & Responsibility• Context, not Control• Highly Aligned, Loosely Coupled• Pay Top of Market• Promotions & Development

114

Page 115: Netflix Culture: Freedom & Responsibility

In some time periods, in some groups, there will be lots of opportunity and growth at Netflix

Some people, through both luck and talent, will have extraordinary career

growth

115

Page 116: Netflix Culture: Freedom & Responsibility

Baseball Analogy: Minors to Majors

• Very talented people usually get to move up, but only true for the very talented

• Some luck in terms of what positions open up and what the competition is

• Some people move to other teams to get the opportunity they want

• Great teams keep their best talent• Some minor league players keep playing even though

they don’t move up because they love the game

116

Page 117: Netflix Culture: Freedom & Responsibility

Netflix Doesn’t Have to Be for Life

• In some times, in some groups, there may not be enough growth opportunity for everyone

• In which case we should celebrate someone leaving Netflix for a bigger job that we didn’t have available to offer them– If that is what the person prefers

117

Page 118: Netflix Culture: Freedom & Responsibility

Two Necessary Conditions for Promotion

1. Job has to be big enough– We might have an incredible manager of something, but

we don’t need a director of it because job isn’t big enough• If the incredible manager left, we would replace with a manager,

not with a director

2. Person has to be a superstar in current role– Could get the next level job here if applying from outside

and we knew their talents well– Could get the next level job at peer firm that knew their

talents well

118

Page 119: Netflix Culture: Freedom & Responsibility

Timing

• If a manager would promote to prevent an employee from leaving, the manager should promote now instead of waiting

• Both tests still have to be passed 1. Job big enough 2. Superstar in current role

119

Page 120: Netflix Culture: Freedom & Responsibility

Development

• We develop people by giving them the opportunity to develop themselves, by surrounding them with stunning colleagues and giving them big challenges to work on– Mediocre colleagues or unchallenging work is

what kills progress of a person’s skills

120

Page 121: Netflix Culture: Freedom & Responsibility

Career “Planning” Not for Us

• Formalized development is rarely effective, and we don’t try to do it– e.g., Mentor assignment, rotation around a firm,

multi-year career paths, etc.

121

Page 122: Netflix Culture: Freedom & Responsibility

We Support Self-Improvement

• High performance people are generally self-improving through experience, observation, introspection, reading, and discussion– As long as they have stunning colleagues and big

challenges to work on– We all try to help each other grow– We are very honest with each other

122

Page 123: Netflix Culture: Freedom & Responsibility

We want people to manage their own career growth,

and not rely on a corporation for “planning” their careers

123

Page 124: Netflix Culture: Freedom & Responsibility

Your Economic Security is based on your Skills and Reputation

We try hard to consistently provide opportunity to grow both by

surrounding you with great talent

124

Page 125: Netflix Culture: Freedom & Responsibility

Seven Aspects of our Culture

• Values are what we Value• High Performance • Freedom & Responsibility• Context, not Control• Highly Aligned, Loosely Coupled• Pay Top of Market• Promotions & Development

125

Page 126: Netflix Culture: Freedom & Responsibility

We keep improvingour culture as we grow

We try to get betterat seeking excellence

126